Tánaiste and Minster for Enterprise Leo Varadkar said today that the economy is "actually ahead of where we thought we would be".
Mr Varadkar said he still believes it is possible to get the public finances back on a sustainable footing without tax increases and cuts to spending.
"I think I am even more convinced of that than I have said previously," he stated on Morning Ireland today.
The Tánaiste said the number of people returning to employment is "really encouraging". "We're seeing some very good exchequer figures and the taxes are coming in," he said.
"We're actually ahead of where we thought we would be at this point in the economic cycle," he added.
When asked if he wanted to cut taxes and increase welfare, Mr Varadkar said: "We want to do all these things in a prudent fashion. The overriding objective is of course to eliminate borrowing for anything other than capital."
Mr Varadkar said this will still leave room for a tax package every year of about €500m and increases in spending of about an additional €1 billion on top of adjusting for demographics.
A pension and welfare package is important, he claimed.
"One thing I do feel very strongly about is that we do need a pension and welfare package in this budget," he said.
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"We see a return to inflation; the cost of living is now rising. Pensioners and people on fixed incomes haven't seen an increase in two years now. If they don't get an increase now actually, their living standards will fall," he stated.
He said that as a party that believes in a just society and reward for work "we cannot stand over that".
This is the opinion of the whole of Government, Mr Varadkar said. He added that the Government is always willing to "listen to the advice in the round" from different advisory groups, including Ibec and the ESRI.